May. 8, 2014 - 02:58PM
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Rheinmetall CEO Armin Papperger says the group is making progress on 'Rheinmetall 2015,' a new efficiency program. (Griesch)

BONN — Düsseldorf-based Rheinmetall Group announced growth in sales and a higher order intake for the first quarter of 2014, although the group’s defense sector recorded an operating loss.

In light of developments in the first quarter, Rheinmetall is not changing its overall forecast for 2014, which calls for an operating result of between €220 million and €240 million (US $306.3 million to $334.2 million) for the group, with €85 million to €95 million coming from the defense sector.

Defense sector sales rose €51 million to €414 million, 14 percent higher than the €363 million for the same period in 2013. However, the company said sales were lower than in the same period in years prior to 2013.

The operating result for the defense sector in the first quarter showed a loss of €42 million. According to Rheinmetall, earnings improved in the defense division’s Electronic Solutions and Wheeled Vehicles sectors, but those gains were nearly offset by a fall in earnings in the Combat Systems division, mainly because of the continuing weakness of the munitions business.

Orders rose by 62 percent to €675 million in the first quarter of 2014. According to Rheinmetall, the sector’s order backlog is nearly 25 percent higher than in the previous year, reaching a record level of €6.22 billion

One major order was for a set of logistical vehicles for Norwegian armed forces. The country signed a framework contract through 2025 with Rheinmetall MAN Military Vehicles, a joint venture of Rheinmetall (51 percent) and MAN Truck&Bus (49 percent).

Simultaneously, Norway placed a first order for new trucks for more than €100 million. Another order was from an unnamed nation from the Middle East/North Africa region, which placed a follow-on order for fire units to expand its existing Oerlikon Skyguard anti-aircraft system. This order is worth around €83 million.

In total, the Rheinmetall Group generated consolidated sales of €1.08 billion in the first quarter of 2014, an increase in volume of €115 million. In the same timeframe, the group’s order intake rose by €343 million to €1.36 billion. The company’s backlog is said to be at a new high with nearly €6.7 billion.

The operating result improved by €15 million year on year, to a profit of €1 million. The improvements were recorded by the group’s Automotive sector in particular, which achieved sales of €666 million, growing 11 percent.

“We are making good progress with the implementation of our strategy program, ‘Rheinmetall 2015,’ with which we intend to return to our earlier profitability,” Rheinmetall CEO Armin Papperger stated.

“We are back on track for growth and are improving our earnings. With a record order backlog and promising market positions in numerous countries, we have good prospects for future success.”

The “Rheinmetall 2015” program focuses on internationalization, product innovations and cost efficiency. As one result, the international share of sales is expected to increase in both sectors. Defense wants to generate about 50 percent of its sales outside Europe and Automotive about 33 percent. ■